Preston Tucker and His Battle to Build the Car of Tomorrow

by Steve Lehto

  Mary Jane and John decided to get married but thought a low-key ceremony would be best in light of the trial. The two discreetly went to Waukegan, about forty miles from Chicago, assuming the matter would stay under the radar. When the newly married couple returned to Chicago they saw their marriage reported in the newspaper: TUCKER SON MARRIES. They later found out that the judge who had officiated their wedding was the brother of an attorney involved in the Tucker trial.55

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  Despite the government’s best efforts, prosecution witnesses continued helping Tucker’s cause and did very little to prove the fraud and conspiracy case. One witness mentioned the Kaiser-Frazer company, which allowed a defense attorney to ask follow-up questions. Wasn’t it true that Kaiser-Frazer promised to produce a front-wheel-drive car that they never followed through on? And wasn’t it true that, rather than prosecuting them, the government had lent Kaiser-Frazer another $44 million to help its business? Yes, it was. At this point, the jury knew that the government was playing favorites. (Some in Congress likewise wondered why Kaiser-Frazer was receiving so much money from the government. One of the directors of the Reconstruction Finance Corporation appeared before Congress to explain the department’s loose purse strings. He said it was part of the RFC’s attempt to help struggling “small companies.” When a congressman noted that Kaiser-Frazer was by no means “small,” he backpedaled: “It is a small business in the automotive field.”)56

  Several witnesses were called to discredit Tucker’s advertising claims. Had he designed and built race cars with Harry Miller? Fred Offenhauser, a famous race engine builder who had worked with Harry Miller, said that Tucker did not do any engineering work, and Miller’s son and widow both said they thought Tucker’s relationship with Miller was minimal. Preston Tucker’s attorney simply asked the widow who had paid for Harry’s funeral. She quietly admitted it had been Tucker. Many observers thought this answer erased everything she had said previously about her late husband’s time with Preston Tucker.57

  The prosecution scored some points when they called Herbert Morley, onetime vice president of the corporation. He had angrily confronted Tucker when he and Rockelman became concerned about $800,000 that had been spent without proper authorization. It was this argument that had led to his departure from the company.58

  But the next witness hurt the prosecution’s case. Emery Hughett had been a bookkeeper at Ypsilanti Machine and Tool and presumably could shed light on the odd relationship between that company, owned by Tucker’s mother, and the Tucker Corporation. He testified that an IRS agent named “Mr. House” showed up at his office and started taking records even though he had no subpoena or court order. Hughett stopped him and took the papers back, at one point slamming a drawer and telling the agent he would not be taking anything without legal justification. The IRS agent became livid. He told Hughett that Senator Homer Ferguson would “get Tucker.”59 After the IRS agent left empty-handed, Hughett was in a local restaurant and saw two men he did not recognize looking at records taken from Ypsilanti Machine and Tool. He later came to know them as SEC representatives James Goode and Frank Corbin. Hughett raced back to the office and saw that records were missing. He found some of the records stashed in a desk placed behind the building for trash pickup, leading him to believe the agents were planning to come back and get them later.60 Goode and Corbin were both working on the SEC report, which would play such a major role in Tucker’s downfall.61

  Hughett was called as a prosecution witness, but he told the judge he was scared of the prosecutors. The prosecution asked Hughett to identify records of the Tucker Corporation that he had not created. He offered to identify any records he recognized but protested that he could not vouch for documents with which he was not personally familiar, implying that they could have been altered or even fabricated completely while in government hands. At one point he turned to the judge and said, “I’ve been threatened so many times I don’t know what to do.”62 He wanted to testify truthfully but was worried he would be harmed by the government if he didn’t perjure himself and testify falsely about Tucker.

  His testimony became more interesting on cross-examination. Hughett had been summoned to testify before the grand jury. There, he said, SEC agents pulled him aside and threatened him. They would have him indicted if he told the grand jury about the illegal searches of the Ypsilanti Machine and Tool offices.63 When he left the grand jury room after testifying, an SEC official was waiting for him. “You told them about the scrape at Ypsilanti, didn’t you?” When Hughett denied it, the SEC man replied, “You’ll be indicted if you do.” Curious as to what charge he could be indicted for since he had done nothing wrong, he asked. The man replied, “We can always drum one up.”64

  Cliff Knoble found the trial fascinating, beyond the notion that he faced decades in jail if he was convicted. He wrote limericks and took notes to occupy his time. He found one exchange particularly enlightening. The prosecution called a witness, a former engineer who had been hired by Tucker and given the task of redesigning an engine to use in the sedan. The witness told of how the project was a failure and that, when he had finally quit, the engine he had been working on had been a dead end. His conclusion was that Tucker, as a result, had no engine to put in the sedans, if they were ever to be built. Smugly, the prosecution turned the witness over to the defense for cross-examination.

  The witness admitted he was unaware that Tucker had three separate engine projects going at the same time and had told each one to work in the strictest secrecy. As a result, each group thought it was the only one working on an engine for the Tucker sedan. Preston Tucker had thought this would be a fine way to see if the different groups could come up with novel solutions to the problems they faced. The witness’s project had flopped. The second and third groups’ projects, however, had succeeded. The second group had gotten an engine to run and the third group had come up with the engine that Tucker had ordered into production. The witness was unaware that a competing group with the Tucker Corporation had not only built a successful engine but that when the factory was shuttered, more than a hundred engines had been manufactured and were sitting in the factory, ready for installation. It had never occurred to the witness, or the prosecutor, that in an organization that large, someone else might have been working on the exact same problem and reaching different results.65

  Many government witnesses suffered from a similar lack of knowledge. The prosecutors apparently asked witnesses if they knew about various aspects of Tucker’s business and if the answer was negative, jumped to the conclusion that there was no evidence to support the contention. One point the prosecution kept returning to was that “Tucker had no connection with any development of racing cars for the Indianapolis speedway.”66 If Tucker had no such connection, then the advertising and promotional materials issued by Tucker contained false and misleading statements. The prosecution called a directing engineer of Gulf Oil Research and Development to the stand in mid-December and asked him about Tucker’s role at Indianapolis. R. J. S. Pigott testified he was unaware of any work done by Preston Tucker on any automobiles at Indianapolis. Presumably, the witness would have known of any connection, as in 1941 Gulf entered cars at Indianapolis that had been designed by Miller.

  The defense attorneys then cross-examined Pigott, who quickly admitted he had no idea what role Tucker played in Harry Miller’s enterprise. All he knew was that he had not dealt with Tucker in 1941. What happened before or after that, the witness could not say. Pigott’s testimony was so pointless it drew objections from the defense, who accused the prosecution of “always wanting to waste and spend more time, more time.”67 Reporters who had stuck around to this point noted that the courtroom had long since lost its appeal to spectators and was even wearing on the defendants. One news report even included a mention of Cliff Knoble’s entertaining scribbles.68

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  In early December, SEC commissioner Harry McDonald spoke at the thirty-eighth annual conventi
on of the Investment Bankers Association of America in Hollywood, Florida. His introductory remarks described the range of activities policed by the SEC, including “the crackpot schemes to the Tucker dream-car which cost American investors $26 million.” He also said, “I want the public, and particularly you in the industry, to get the best treatment possible, fair—courteous and expeditious.”69

  During Tucker’s trial, various witnesses referred to material contained in the SEC report, and it was clear that the report was the prosecution’s road map. Although work product of an attorney may be privileged and not subject to disclosure to the opposing side, the SEC report clearly did not qualify as work product or privileged material. In fact, the report had already been shown to enough third parties—journalists in particular—that the prosecution was certainly foreclosed from raising that argument when the defendants asked the court to order the prosecution to produce the report. The prosecution objected. Judge LaBuy said:

  As to the objection of the government on the ground of secrecy and confidential nature of the report, the government is in an anomalous situation. Confronted with evidence of dissemination of the report to the public press by the [SEC], the District Attorney finds himself on the horns of a dilemma when duty requires him to plead the confidential nature of the document sought to be protected.

  To permit the SEC to expose the report to the public press and have the District Attorney deny the same right to the defendant shocks the Court’s sense of justice, fairness and right.70

  Although the court’s conscience was shocked, Judge LaBuy refused to order the prosecution to turn over the report at that time. Presumably, he did this because the release of the SEC report could only be ordered by the SEC itself. And they continued to tell the court that they had never released it to anyone. Tucker and his codefendants would have to wait until the trial was over to appeal this issue.

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  As the end-of-year holidays approached, some defendants began suffering dire financial problems because of the trial’s length. Though the prosecution planned to call more than seventy witnesses, they had only gotten through a third of them. Most of the defendants did not have much money to begin with, and some had actually found part-time jobs to perform while not in court. Mitchell Dulian worked nights and weekends selling cars. The defendants asked if the court could shorten the holiday break to make the trial end sooner. But the court took a two-week break for the holidays.71

  When the trial resumed after the New Year, the prosecution turned to investors who had bought Tucker stock or dealerships. Dan J. Ehlens testified he had done both.72 He had been grilled by SEC investigators for four days before Tucker was indicted.73 In 1946 Ehlens had read the Pic magazine article and became interested in becoming a Tucker dealer. He already owned a used car dealership in Minnesota and traveled frequently to Chicago on business. Rather than writing to Tucker, he went to the plant and introduced himself. He then made several more trips, convincing Tucker that he deserved a franchise. He met with Rockelman and A. R. Peterson, a regional sales manager for the Tucker Corporation.74 In this respect, Ehlens’s experience was typical. Many who bought dealerships did so after taking the initiative to go to the plant in Chicago. Some went to see if the project had substance; others went to make an impression on Tucker.

  Ehlens fulfilled the dealership requirements and signed a contract with the Tucker Corporation on February 18, 1947. He committed to buying fourteen hundred cars over two years and paid $14,000 in cash up front. He signed a note for another $14,000. Ehlens was so enthusiastic about the project that he convinced the Tucker Corporation to let him be a distributor and set up dealerships around his area. He did that with gusto and found himself swamped with requests from others.

  On cross-examination, Ehlens testified that he ran a credit check on the Tucker Corporation, but not until after he had gone to Chicago several times seeking his own franchise. He had met with Rockelman and signed a contract before he sought a Dun & Bradstreet report on the company. The report showed nothing remarkable at the time, but the defendants wanted the jury to see that Ehlens had not been particularly vigilant in how he had entered this transaction—otherwise, he would have run the check earlier.

  On May 20, 1948, Preston Tucker brought a blue Tucker sedan to the Golden Valley Country Club near Minneapolis, where Ehlens saw it. The car received a “tremendous reception.”75 In July, a black Tucker ’48 sedan was driven to Minneapolis by a Tucker representative, where it was displayed and loaned to journalists for test-drives. Ehlens himself drove the car three thousand miles during that time and noted it ran well, although it only got 20.8 miles per gallon. When prompted by the government, he noted the car had a manual transmission, not the automatic that Tucker had promoted. Still, he admitted, “I was greatly pleased with the performance of the automobile.”76

  Ehlens became disillusioned with the Tucker enterprise when cars were not forthcoming to sell, but he managed to acquire one for himself. After he recounted his story for the prosecution, defense attorneys talked to him about the Tucker ’48s he had driven. There were the two brought up to Minneapolis as demonstrators and the one he owned. How did the car treat him? While he had been almost vitriolic on the topic of Tucker the man, he spoke lovingly of his Tucker ’48. At the time of the trial, he had driven his own ’48 thirty-five thousand miles and at speeds exceeding 90 mph. “It was the finest car he had ever driven,” one newspaper reported of his testimony.77

  Ehlens also damaged the prosecution’s case when he described visiting the Tucker plant many times. He saw the assembly line in action. He did not know its length, but when pressed, he said it was “plenty long.” Workers were assembling cars on the line, but he did not know how many. Each time there, more cars were being produced.

  “When was the next visit you made there?”

  “About another thirty days.”

  “What did you see on that visit?”

  “More cars.”78

  The government presented its numbers, derived from the SEC investigation of the Tucker Corporation books and papers. In its existence, the company had taken in $28,491,652. Expenditures totaled $28,309,280.79 The largest budget item had been employee salaries and wages. Another huge expense was the rent and operating costs of the plant, including taxes.80 While the sides wrangled over whether the money was spent or earmarked properly, one fact came out loud and clear: the money had not been stolen and it had not disappeared.

  Joseph Turnbull, an SEC accountant, was the final prosecution witness.81 He found a series of “questioned transactions” while scrutinizing the Tucker Corporation books. According to his calculations, Tucker had received $500,000 from the venture and the various defendants had received close to a million dollars combined. Yet he could not point to any fraudulent or dishonest transactions. It was simply his opinion, as an accountant, that the transactions were questionable. He hadn’t even investigated any of the items beyond seeing them listed in the company’s books.

  On cross-examination, defense attorneys took turns attacking his testimony. Broker Floyd Cerf’s attorney grilled Turnbull regarding his claim that Cerf had made $2.443 million dollars in commissions selling Tucker stock; the witness apparently did not understand that more than six hundred security brokers had sold Tucker stock, each of them deducting a sales commission. None of that money ended up in Cerf’s hands. Many of Turnbull’s other numbers—for instance, suggesting Preston Tucker skimmed half a million dollars from company coffers—were likewise shown to be unsupported. Tucker had sold the corporation two cars, one for $3,394.78 and the other for $1,763. Turnbull described the transactions as profiteering, not knowing Tucker had bought the cars at exactly the same prices at which he sold them. Turnbull, the “accountant investigator,” had not bothered to determine what the cars had cost in the first place.82

  As the withering cross-examination continued, Turnbull’s answers became less and less specific. After noting how Turnbull’s numbers conflicted with each other
, an attorney asked, “You, yourself, have arrived at several figures of benefits to Mr. Tucker from your worksheets, depending on the way you figure it?”83

  “Yes, it depends on what you call it,” the accountant replied. “Some of the things you can treat one way and sometimes you can treat them another.”

  Scrambling, Turnbull said he had only made a “partial investigation” of the finances in question. The defense attorney asked if he had been told to make “only a partial investigation of what the books and records show?”84

  “I was not instructed to make a full investigation, if that is what you mean.”

  For the prosecution’s final witness—the seventy-third overall—Joseph Turnbull was not the grand finale many had expected.85 Nevertheless, after he was excused, the prosecution rested its case.

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  It was now the defendants’ turn. On January 16, 1950, the parties assembled in the courtroom and the judge told the defendants to call their first witness. The attorneys stood, and each announced they would not call any witnesses. As far as they were concerned, the case presented by the prosecution was so flimsy, it didn’t need to be defended against. “You cannot put up a defense where there is no offense,” attorney Dan Glasser told the judge.86 The defense attorneys offered to move directly to closing arguments. The spectators were stunned, as were the prosecutors, who had assumed closing arguments would not be made for a month or two. The judge gave them two days to prepare.87